2020 vision – the benefits of foresight when putting contracts together

January 2020
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This recent case is a salutary lesson on the importance of thinking ahead and getting the right bases covered in your commercial agreements. The case relates to an agency/introduction agreement, but the same advice applies to all sorts of agreements. I mention some specific pointers below, but the key advice is to think carefully about who you are dealing with, and what kinds of things might happen in the future which you would want to get picked up by the commercial deal you are negotiating, and how much control you might have over them. Think about devious ways in which the other side might try to get out of things…

Recent case

Sports Mantra India Private Ltd was a marketing company which aimed to introduce sponsors to sports teams and take whacking great commissions for doing so. In 2009 it signed an agency agreement with Force India which owned the Force India Formula 1 team. This said that Force India would pay ‘commission in respect of sponsorship fees’ to Sports Mantra ‘If Force India enters into a sponsorship agreement with [a potential sponsor] within 12 months of an Introduction effected by [Sports Mantra]…’.

In July 2009 Sports Mantra introduced a potential sponsor to Force India – Sahara Adventure, part of the Sahara Group which was already known for sponsoring the Indian cricket team. Sponsorship discussions which could have involved around US$66m-worth of sponsorship rights took place until February 2010, but then stopped. It seems that a while later in February 2011 Force India asked Sports Mantra to ask whether Sahara Adventure might still be interested, and Sports Mantra put them back in touch but then had no further involvement. The next thing it heard was that in October 2011 an investment agreement had been entered into with Force India’s parent company under which Sahara Adventure bought some shares in this parent company for around £60m, and that as part of this agreement the Formula One team’s name was to be changed to Sahara Force India, and the Sahara logo was to be added to the team’s cars. Force India itself was not a party to this agreement.

Sports Mantra said that since as a result of all these arrangements Sahara Adventure ended up with its name in the team name and its logo on the team cars surely at least some of what the potential sponsor paid for the shares in Force India’s parent company should be treated as being part of an overall sponsorship agreement which should entitled Sports Mantra to some commission?

Force India disagreed so Sports Mantra took it to court. So, was this a sponsorship agreement? Was it entered into by Force India? Was it entered into within 12 months of the introduction?

What did the court say?

No, no and no. Sports Mantra lost on all fronts. The judge in the High Court said that however unfair it might seem to be, the agency agreement’s terms were quite clear. So:

• The agreement referred to Force India specifically, and references to Force India could not somehow be treated as including its parent company.
• The agreement referred to a potential sponsorship agreement, and to commission in respect of sponsorship fees. But the benefits Sahara Adventure obtained such as use of its name and logo were a consequence of its share investment in the parent company and share ownership, not of any sponsorship agreement.
• The 12 month period was quite specific, and you couldn’t somehow suspend it for a bit for periods when the introduced parties weren’t talking and then re-start it again.

Some pointers:

• It’s always worth thinking about adding some kind of general ‘non-circumvention’ clause, to try to avoid the risk of loopholes being taken advantage of. Try to set out meaningful general principles as well as specific triggers to avoid the risk of loopholes.
• Think about adding obligations on the parties to deal with each other in ‘good faith’. I’ve touched on this in a few previous legal briefings.
• Think about the words you use. Do they have the meanings you might want them to have? (Here, the court clearly decided that ‘sponsorship’ and ‘sponsorship agreement’ should have the quite straightforward and quite limited meaning that it decided most reasonable people would think the parties must have intended).
• If you are dealing with just one company in a group of companies, try to ensure that any relevant triggers also apply to other companies in the group, or even individuals or others connected with them.
• Think about the risks of having arbitrary all-or-nothing cut-off periods, particularly when they relate to things you have no control over. Perhaps introduce a sliding scale of commission depending on how long after the introduction the trigger event takes place, rather than an all-or-nothing cut-off date.

Case: Sports Mantra India Private Ltd & Anor v Force India Formula One Team Ltd [2019] EWHC 2514 (Ch) (30 September 2019)

One final thought – might it sometimes be better not to bother with lawyers and contracts at all?

Sports Mantra lost here because it entered into an inadequate contract. Funnily enough, another September 2019 case involving Force India – AMP Advisory & Management v Force India – is an example of where it can be helpful not to have agreed a written contract at all. Here, AMP Advisory was awarded £150k on a quantum meruit basis for its help in providing a potential sponsor for Force India. Often in these kinds of introduction/commission cases it is at least clear that the introducer can’t have been expected to go to the effort of making a profitable introduction just for the fun of it, and that some kind of reward would be appropriate. So if things aren’t set out clearly enough to form a clear agreement (and these cases often involve entertaining evidence as to whether some form of agreement might have come into existence, involving a mixture of drinks conversations, email exchanges, Whatsapp messages etc) the introducer might be able to fall back on the equitable laws of unjust enrichment and quantum meruit, which basically say that in such cases the introducer should be able to recover what its efforts were worth. The basis of valuing quantum meruit awards is not very straightforward, and the amount is unlikely to be as much as the enormous cut that the introducer might have wanted, but at least the introducer will be able to recover something. But the court case will be difficult and expensive (and sometimes a bit embarrassing if it makes the press), so I would still recommend trying to put a decent agreement together…